I’ll start out this article with a sentence that people would like to hear but think that they cannot afford to – it’s alright to have debts. Of course, it’s necessary to qualify exactly what debts I’m talking about. Credit card debts which you have accumulated through months of eating gourmet food and shopping designer clothing without stopping for one second to think if you can afford to buy these luxury items is not one of these debts that I’m talking about, and that’s not negotiable. However, when it comes to medical emergencies or buying that modest house which you can afford to pay off with your present income, then it’s totally fine.
However, once you’ve signed on the dotted line and used your money to acquire that new house, you have to understand that your obligations have just started. Loans are useful but they’re not something which you ought to get used to. The faster you pay off a debt, the better. Here are ways to do just that:
1. Go beyond the minimum.
You may have to tighten your belts a little bit more but it’ll be totally worth it in the long run. When you’re just paying the minimum, the only thing you’re doing is letting your debt drag on, weighing you down and your finances in the process. And paying just 2 to 3 percent of your principal loan is what your creditors want you to do because that means more interest for them. So swim against the tide, stop buying that latte to work, and pay more.
2. Try to borrow against your whole life insurance.
Term insurance policies do not carry this option so if that’s the only kind of policy you’ve subscribed to, then this might not be an open solution for you. But if you are allowed to borrow against your policy, then do so. While it’s your own money which makes borrowing it sort of an oxymoron, it’s also nice to note that the interest rate for borrowing against your life insurance is way below commercial rates. With the money you get, you can pay off a high-interest debt and still take your time paying that loan you made on your life insurance policy.
3. Organize your credit card debts.
Alright, while it’s never ideal that you have multiple debts, sometimes it happens and this can put you at a very confusing predicament. Which debt do you pay off first? If you have more than one credit card try transferring your debt on a high-interest credit card to a low-interest one, and then work hard towards paying that card. Instead of losing money which you could have added to paying for your home’s mortgage because of high credit card interest rates, you can make smarter use of your resources.
Anthony Roberts, the writer, shares his insights about personal finance and savings. He provides great advice. Read more on his site, http://www.bradloans.com/.